Question

Zara Smartman, originally an IT graduate who has completed the MBA program of the University of Sydney by 30 June 2016. She is married on 20 December 2016 with a Pharmacist who also graduated from the University of Sydney. Zara is now a team leader with American Express in Sydney. His gross salary is $225,000 with a withholding tax $75,000. During the year ending 30 June 2020 her interstate travel including Air ticket, other transport, food and accommodation totaled $20,000. Zara believes in elegance and aspires high living. She has spent $10,000 during the year to 30 June 2020 on dresses, jewelry and personal fitness.
Zara has attended [with her husband John Smartman] an International IT Conference between 10 – 13 January 2020 in the Silicon Valley, and incurred the following outgoings – Conference Fees $5,000, Air ticket $4,000, Food and Accommodation $1,500. Zara is lucky in that she has won the first prize, a Rolex watch worth 35,000, in the conference lucky draw.
Mr and Mrs Smartman has also opened a home-based business [Pharmacy Hero] on 1 January 2017 to develop and market a comprehensive computer software for the pharmacy industry in Australia. The income and outgoing history of Pharmacy Hero shows (i) for the 30 June 2017 – income is nil and total revenue outgoings is $500, (ii) for the year ending 30 June 2018 - income is $2,000 and total revenue outgoings is $15,000, (iii) for the year ending 30 June 2019 income is $16,000 and total revenue outgoings is $26,000, and (iv) for the year ending 30 June 2020 income is $80,000 and total revenue outgoings is $40,000. They registered the business name together on 1 January 2017 and registered for Australian business number from 1 July 2018, and started formal business promotion from that date. They have acquired a car for $25,000 on 10 June 2020 for use in Pharmacy Hero.
The accountant, June Supermart has billed them for the following services during the year ending 30 June 2020 – (i) preparation and lodgment of personal tax return year ending 30 June 2019 [Zara Smartman $2,750], (ii) preparation and lodgment of tax return year ending 30 June 2019, [Pharmacy Hero $1 100], and (iii) accounting and other business services [Pharmacy Hero $3,300] You are required to  
(i) advise how the above incomes of Mrs Zara Smatman are assessable in Australia, and how and to what extent the above outgoings are allowable for income tax purposes; and
(ii) compute Zara’s income tax liability for the year ending 30 June 2020 from the facts and information listed above.

Answer 1

(i)As per the given income details of Mrs. Zara smatman computation of Income which are assessable in Australia for the period ending 30th June 2019: Currency in $

Income from salary:

Gross Salary: 225000

Income from other sources:

Wrist Watch: 35000

Gross total Income of Mrs.Zara is 260000

Here the share of Profit from the Pharmacy hero is exempted from the tax and the personal expenses of 10000 is not available.

Income from Business or Profession of Pharmacy Hero:

Gross profit: 80000

Less: Travelling Expenses: 20000 (Here assumed that the travel is for the purpose of the Business)

Less: Expenses incurred for IT conference trip:10500(5000+4000+1500)

Less: Return filing expenses: 4400(3300+1100)

Net Profit: 45100

(ii) The tax liability of Mrs.Zara

Gross total Income:- $260000

Tax on which spencial rates applied: 35000

Tax on the above 10850: (35000*0.31)

and on the Salary the withholding tax is the tax liability of 75000

SO the total tax liability of Mrs. Zara is: 85850(75000+10850)